Thinking of Selling in 2015? Get Your Stuff Together: How to Catch the Eye of Private Equity

Thinking of Selling in 2015? Get Your Stuff Together: How to Catch the Eye of Private Equity

If you are thinking of selling your business in 2015, one of the first things you need to know is who will be your potential buyers. And the odds are good that your best buyer could be a private equity group.

In general, private equity firms are involved in about 50% of transactions between $5 and $50 million.

But this is the challenge: private equity firms receive hundreds of deal proposals every year. Only the smallest fraction of those proposals makes it through to an offer. Here are some statistics for a recent 3-year period.

Average Deals Received a Year: 1180

Deals Reviewed: 185

Management Visits: 18

Letters of Intent/Offers Made: 6

Of all the deals that come across the desk of a private equity group in a year, only 15% actually get looked at. Only 10% of the deals actually reviewed will get a visit. In the end, an average of 6 offers will be made – that’s less than half a percent of the deals that originally came in. It gets tougher:

Of the offers made, it is likely only 2 deals will close.

So, how do you make sure your business gets a second look and gets a chance at being in that tiny percentage that gets an offer? How do you rise to the top of that slush pile?

You have to get your stuff together.

Consider this: For a $10-30 million sale, it will cost a private equity group from $250,000 – $400,000 to close the deal. They have to be convinced that you are not going to waste their time and money.

You can’t just slap a For Sale sign on your business and wait for the offers to come. Selling a business takes considerable preparation and requires expert guidance.

Here are three things to take away:

1. Be prepared.

Preparation for a sale will greatly increase your chances for success and should start several years in advance. Your company needs to be in the best possible condition to attract the attention of qualified buyers. Private equity will not give a moment’s consideration to proposals with even a whiff of inadequate preparation. Proper preparation includes:

2. Be Selective

It is very important to get your business in front of the right buyers and investors. A business valued at $10 million will struggle to get the attention of a private equity firm that specializes in deals over $25 million. Likewise, don’t shop your construction business to a firm that only deals in technology and enterprise software. Importantly, only targeting your best fit buyer pool will reduce the chance of a breach of confidentiality. Keeping the sale of your company confidential is vital for continuing operations and ultimately for the success of the transaction.

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Walt Lipski is a principal of Upton Financial Group, LLC, an Arizona and California Investment Banking and Advisory firm for entrepreneurial owners of companies with annual revenues between $5 and $75 million.

Walt Lipski owns and operates this website, and provides non-securities related investment banking services through Upton Financial Group LLC, primarily to companies with annual revenues between $5 and $75 million. Any testimonials presented herein are not intended to represent the experience of all clients or guarantee future performance or success. Real Estate transactions completed through Upton Advisors, LLC. Hyperlinks on this website are provided as a convenience and we disclaim any responsibility for information, services or products found on websites linked hereto.